The federal government’s proposed surtax on profits earned by the largest banks and insurance companies won’t be addressed until the spring budget, a senior government official said Tuesday.
During the most recent federal election campaign, the Liberals campaigned on raising corporate taxes on bank and insurance company profits over $1-billion by 3 percentage points, from 15 per cent to 18 per cent. They also proposed a special levy called the Canada Recovery Dividend that would be collected over the next four years. The proposed measures were expected to add around $10.8-billion to government coffers over the next four years.
The government’s fall fiscal update, published Tuesday, contained no mention of the proposed measures. A senior government official said that they would be addressed in the spring budget, which is expected in March or April. The Globe and Mail is not identifying the official because they briefed reporters during a media lockup on the condition that they not be named.
That could mean that the government won’t collect $296-million in revenue from the tax that was projected for the government’s current fiscal year, according to estimates by the Parliamentary Budget Officer.
Senior figures in the banking industry were outraged at being singled out for higher taxes, but broadly expected the tax would be implemented soon – perhaps as early as January. But there have so far been few discussions between federal officials and the financial sector about the tax plan’s mechanics, other than that it is intended to apply to Canadian taxable earnings. Discussions about how to apply the recovery dividend, which is projected to raise $1.3-billion next year, are likely to be more complex and could include consultations with Canada’s banking regulator.
Bank chief executives have mostly avoided criticizing the tax proposal directly, and senior bankers have said they can only guess its exact impact on earnings. But Royal Bank of Canada CEO Dave McKay said it would make it harder to attract much-needed capital to help finance a transition in Canada’s economy.
“When you start proposing taxes right now in this narrow way, it can have a real detriment to the overall investment thesis for Canada,” he said on a conference call with banking analysts last week. “A tax on banks – a unique tax like that – means less capital for small business, less capital for investment in our clients.”
The fiscal update also said draft legislation for a tax on luxury automobiles, boats and private aircraft will be released early in 2022, and the final design of a tax incentive for carbon capture and storage would be outlined in the spring budget. A proposed 1-per-cent tax on vacant homes owned by non-residents and non-Canadians is intended to come into effect for the 2022 calendar year.
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